All Forum Posts by: Wes Blackwell

Hi @Fernando E. ! Great question!

I've had several other discussions with investors from the Bay Area about this, so here's my take:

1. San Francisco Bay Area -- You're going to have a hard time making the numbers work, but it is possible. When you're in an area where $250k only buys you a burnt down house with extreme fire damage, it might be time to look for something else. The Bay Area will continue to have low inventory and affordability issues, and will continue to see appreciation because of the unmet demand. But just like New York, that's a real estate market for the "big boys" who can wipe their behinds with a couple million dollars. You don't have that luxury, and the numbers aren't working for you anyways, so I'd suggest looking elsewhere for your first deal. What's more, the biggest concern is the market slowing down and it's current risk a real estate bubble of 45-60% while Sacramento's is under 40. Too much money, too much risk, and too little reward if you ask me.
2. Sacramento -- The Roseville/Sacramento area was just selected by Realtor.com to become the #4 hottest metro area in the nation in 2017. We're expected to see an annual sales growth of 4.9% and appreciation of 7.2% next year. Because of the lower inventory that's stimulating this raise in home values, rents in Sacramento are surging to higher and higher prices. Sacramento experienced the second-biggest year-to-year growth for rent in August, with rent in 2015 averaging $1,145, while in 2016, the average for the same month was $1,281. Lastly, the city has started to once again promote itself as "Silicon Valley East" and the city is attracting tech companies to hasten job growth for the future. Over $10 million dollars has been set aside to help tech companies flourish in the next few years, and we'll likely see this growth continue under the new mayor Darrel Steinberg. I've done a ton of analysis for other investors looking in these areas, and I know of several multifamily properties priced under $300k that beat the 1% test and could show you a return of $10,000+ per year. 

You may be able to make it work either way, and each choice has it's own unique challenges. Educate yourself on the markets a little more before deciding and start researching opportunities. Let me know if you ever need me to run out to a property here in Sacramento for you. Best of luck!

@Hui Kiang -- if you're looking to invest locally within a 2 hour drive, the two places I recommend the most are either Stockton (where I'm from) or Sacramento (where I live). Here's why:

1. Sacramento -- The Roseville/Sacramento area was just selected by Realtor.com to become the #4 hottest metro area in the nation in 2017. We're expected to see an annual sales growth of 4.9% and appreciation of 7.2% next year. Because of the lower inventory that's stimulating this raise in home values, rents in Sacramento are surging to higher and higher prices. Sacramento experienced the second-biggest year-to-year growth for rent in August, with rent in 2015 averaging $1,145, while in 2016, the average for the same month was $1,281. Lastly, the city has started to once again promote itself as "Silicon Valley East" and the city is attracting tech companies to hasten job growth for the future. Over $10 million dollars has been set aside to help tech companies flourish in the next few years, and we'll likely see this growth continue under the new mayor Darrel Steinberg.
2. Stockton -- Stockton's main attraction is it's affordability, which was the main reason it surged in home values during the early 2000's before the crash. You can simply not find a cheaper duplex, triplex or fourplex that cash flows anywhere else nearby. The Stockton-Lodi market was the 5th hottest in the country earlier this year, and is still sitting pretty in the top 20 hottest markets according to Realtor.com. Stockton has always been a city of industry, and it shows no sign of slowing down as the city leads the region's job growth. Major companies like Amazon have set up shop there, along with a new rubber recycling plant and a new gas plant. The new leadership under youthful and energetic mayor Michael Tubbs was spurred by the highest voter turnout for the city since 2008. While the city occasionally makes the headlines for bad news stories, perhaps it may be turning around and become a great place to invest yet again.
3. Out of State -- If looking out of state, here's my most important piece of advice: Know the region and potential as in depth as I just described above. Fly out to view the property before purchasing it. Research the local rental rates before just believing what is told to you. Get solid referrals for any turn-key providers you work with along with any property managers you plan on using. You really have to do you due diligence and read what challenges and obstacles other investors have faced investing out of state. It adds another layer of complexity towards an already complex analysis, so be sure you're ready for it.

Anyhoo, welcome to the site! If you're interested in learning more about the potential in Stockton and Sacramento, feel free to connect with me and send me a message. Best of luck to you!

Hi @Anthony Navarro! Great question!

Here's my take, and hopefully I can help you make the right decision, as there are currently a lot of options available:

1. San Francisco Bay Area -- You're right... the numbers simply don't make sense. When you're in an area where $250k only buys you a burnt down house with extreme fire damage, it's time to look for something else. The Bay Area will continue to have low inventory and affordability issues, and will continue to see appreciation because of the unmet demand. But just like New York, that's a real estate market for the "big boys" who can wipe their behinds with a couple million dollars. You don't have that luxury, and the numbers aren't working for you anyways, so I'd suggest looking elsewhere for your first deal.
2. Stockton, Modesto, Sacramento -- these are going to be your best opportunities in California. The prices are much more affordable and you can still find plenty of cash flowing deals to work with. Although you could commute, you're probably better off just putting the 20-25% down and continuing to live near your job. I've done a ton of analysis for other investors looking in these areas, and I know of several multifamily properties priced under $300k that beat the 1% test and could show you a return of $10,000+ per year. Sacramento also has a great rental market, and was just selected by Realtor.com to become the 4th hottest metro market in the US for 2017. I plan on making a killing because of it :-)
3. Out of State Investing -- this may be a better alternative than investing in CA. Why get yourself $200,000 in debt when you can purchase a duplex in Wisconsin for $55,000 and rents for $1,250 per month? This would free you up to get a loan, and earn you gross ROI of 27% annually without having a to take on a lot of debt. The downside is the distance away obviously, and finding a local property manager you trust to look after the property for you.

You've got a lot of options, and you've put yourself in a great position to make your first move into real estate investing... now you just gotta figure out which way to go! Best of luck!

Hi @Jack C.! Welcome to Bigger Pockets!

You'd actually be surprised at the affordability and potential of some of the lower priced markets, Stockton and Modesto CA specifically. I would suggest looking into those areas in the future and seeing if you can make the numbers work... you just might come across a screamin' deal!

The best place to find local meetups for real estate investors is on Meetup.com. If you check out the Career & Business section you'll find TONS of meetups across northern California. I suggest you attend a few and check them out to meet other investors and see what they're like. Best of luck!

Hi @Reymon Hernandez! Great questions! Let me see if I can help:

1. It is really going to depend on your individual needs and goals, as well as your wife's. I tried to do the same thing recently with my significant other, but she wasn't having it! And as they say, happy wife = happy life. But from strictly an economical and investor-minded standpoint, multifamily properties always win. Even if you don't cash-flow, they can significantly reduce your mortgage payment and allow you to store extra money away to pay down debt or save for future investments. Plus once you move out you'll more than likely see a positive net at the end of each month, and that's much less often the case with single family homes here in Sacramento.
2. Once again, that's going to depend on your situation. VA will allow for maximum leverage to get into the property cheaply, but you'll likely have a higher interest rate than if you put 20% down on the property. It can also affect your cash flow in the long run. Lastly, it doesn't look like interest rates will be going back down any time soon, so thinking you'll be able to refinance for a lower interest rate in a few years probably isn't a good game plan. Ultimately you'll have to go with your gut and choose the option that makes the most financial sense for your family.
3. Crime rates, school districts, are the rents high or low for the market? Has the been any deferred maintenance? Is there a large capital expenditure coming up soon (like less than 5 years left of the roof)? What is the appreciation rate for the area over the last 5 years? How does that compare to other areas of Sacramento? Are there any new commercial developments being built that might impact the area? These are just some of the additional things you'll want to consider when analyzing a property.
4. Get educated. In fact, since you're a Realtor you can take advantage of the holiday sale going on at the California Association of Realtor's website. You can get the property management course bundle to earn the Property Management Certification along with the C.A.R.'s Guide to Property Management all for under $300. Also check out Bigger Pockets books on rental property investing and management that you can find here.
5. Meetup.com under the Career and Business Category. REIA stands for Real Estate Investment Association. You'll find several groups in that category on that site. Be aware that you might endure a sales pitch in attending, so leave your wallet at home the first couple times. But there are definitely some local investors there to connect with. The Roseville Meetup seems to be pretty popular on here and is having an event coming up on January 10th. David Oldenburg runs the group and is a member on here, so perhaps he'll see this and chime in.

Never stop learning, and best of luck!

@Michael You -- While these reports are a little old, the Sacramento Rental market is fantastic for investors right now.

http://www.bizjournals.com/sacramento/news/2016/05/04/apartment-rents-growing-at-double-digit-rates.html

http://www.kcra.com/article/why-apartment-rents-are-surging-in-sacramento/6502472

http://sacramento.cbslocal.com/2016/11/17/sacramento-affordable-housing-wait-list-hits-36000/

I have completed some research for the Sacramento Area Multifamily properties currently available for sale, and will direct message you with a list of the top performers.

@Account Closed -- It's the 95841 zip code, off I-80 between Madison and Auburn exits.

Hi @Morgan Bounds! Welcome to Bigger Pockets! You've come to the right place!

A suggestion if I may... since you are already planning that this first housing purchase will be something that you will eventually rent out, I would highly suggest considering looking at a small multifamily for your first purchase. And here's why:

1. Modesto Housing Market Has Seen Most of It's Appreciation Already -- As you'll see in the chart posted below, the median home value for the area is roughly what it was back in late 2004, with the peak ultimately coming in early 2006. No one can say how high the peak will be this time, but you shouldn't be expecting another $100,000 in equity within the next year or two. If it happens, great... but don't plan on it. This means you'll be purchasing the property an objectively high price, as compared to having purchased it back in 2010. Higher price = bigger loan = higher mortgage payment = less cash flow when rented.
   
2. More Units = More Cash Flow -- I recently completed a thorough analysis of the multifamily properties available in the Sacramento area, and the only properties that passed the 1% Test (monthly gross rents close to 1% of purchase price) or had a Gross Rent Multiplier of 10 or below (time in years it would take for property's gross rents to pay for the purchase price of property) were all multifamily units, and more so 3-4 plexes.
3. Financing is the Same as Single Family Home -- there's no added loan requirements, and you can still qualify to purchase the property with FHA or VA loan if you so choose (thank you for your service by the way!) This means you could get in somewhere and experience cash flow or at least a significantly lowered mortgage payment (because the tenant on the other side is giving you $1,000 per month) which puts you way ahead of what you'd see with a single family home purchase.

My suggestion would be to work with a real estate agent who is experienced in working with investors and understands what you're trying to accomplish. They can do the math for you and show you were you'd end up 5 years down the line with a home and with a 4plex. I'll tell you right now though that there is a world of difference... 

You live in one unit, rent out the other ones and essentially have your mortgage paid for you, and you can save your income checks to destroy your other debt and prepare for your next investment. In 2 years, you can still sell the property and be exempt from capital gains. Or, you can move out into the next property and rent the unit you lived in, and now see positive cash flow every month.

Anyhoo, just some food for thought. At least take a look at the options so you're fully informed of what might be possible. That way you'll be armed with the critical information you'll need to make the best decision. I'd be happy to help so don't hesitate to reach out on my profile and connect with me or send me a message if you want some more information. Best of luck and hopefully you get into the academy soon!

I have a client who unfortunately hired the wrong kind of agent... back to back! 

The first one completely overpriced the home and then took it off the market without even telling her, and the second one told her they'd buy it from her if they didn't sell it in 10 days... never bought it... and STILL overpriced it! 

This poor woman! She's been through the wringer with these two and now I'm trying to step in to save the day, and that's where I need your help.

I'm paying for an appraisal for her so she can feel confident about the price this time, and would like to connect someone on Bigger Pockets from the Sacramento area. Ideally it'd be a quick turn-around since I'd like to start marketing it ASAP, but I understand you're all pretty much super busy right now and we can be flexible if needed. But the sooner the better :-)

So if you're the perfect appraiser with stellar record and service mindset, or know of someone who is, don't hesitate to post here or send me a message immediately. We need your help!

Hi @Thanh Nguyen! Welcome to Bigger Pockets! You're in the right place!

There are several things you can immediately do to set yourself on the right path to become a full-time real estate investor, here they are:

1. Educate Yourself -- first and foremost, you'll want to arm yourself with the knowledge you'll need to make your investing strategies work. Since you're just starting out, I'd HIGHLY recommend the many free articles and podcasts you can find right here on the Bigger Pockets site. Just spend a couple hours a week increasing your knowledge, and in no time you'll be miles ahead of the average real estate "investor!" Don't get lured into any "gurus" pitching you $40,000 boot camps either, as you'll be able to learn most of what you need right here from some of the books Bigger Pockets has authored. You'll be surprised at how much insight and knowledge you'll gain from reading these, as they're easily worth 10X the cost!
2. Network with Others -- the second thing you'll want to do is network with other real estate professionals in the area you'd like to invest in. Bigger Pockets has a Local Real Estate Networking Forum and you can tune into the Sacramento Forum and see if you can add anything to the conversations going on there with other like-minded individuals. You'll particularly want to keep an eye out for other investors, real estate agents, loan officers, and other real estate professionals you can add to your "team" to help you reach your investing goals.
3. Learn Your Market -- lastly, you'll want to learn your market and discover what sort of investing opportunities it offers you. What are the best neighborhoods to buy in? What types of properties offer the best return on investment? What other statistics like crime, school ratings, and appreciation rates do I need to be made aware of when choosing a property? You'll find lots of this kind of information on the Sacramento Forums, but you'll also want to team-up with a street-wise agent who can help you shortcut the learning curve, as you aren't the first investor to want to know these questions.

Most importantly... HAVE FUN! Try not to get overwhelmed with all the learning, and don't feel like you have to pull the trigger and make a purchase anytime soon. Socialize with others here on the site and in your local area and things will fall into place on their own time. Welcome, and best of luck!